Page 14 - FSUOGM Week 01 2023

FSUOGM NEWS IN BRIEF FSUOGM

SOFAZ's weighted average the State Oil Fund for 2023 is projected at energy outage in the northern part of
AZN8.99bn (a decrease of 43.1% compared
the country, which left many homes in
investment portfolio for 2023 to 2022), and expenses were AZN11.39bn the city of Ekibastuz without heating in
late November amid freezing sub-zero
(down 1.8% compared to 2022). Thus, the
will be $45.7bn budget deficit of SOFAZ is projected at temperatures.
the level of AZN2.4bn (~$1.4bn). SOFAZ
The average size of the investment portfolio revenues for 2023 are calculated from an
of the State Oil Fund of Azerbaijan average oil price of $50 per barrel (for 2022 EU ministers agree on tougher
(SOFAZ) for 2023 will be $45.7bn, it was $85 per barrel).
according to documents approved by Revenues to SOFAZ from the sale than expected gas price cap of
Azerbaijani President Ilham Aliyev on 30 of profitable oil and gas in Azerbaijan
December 2022. The average size of the in 2022 will amount to AZN6.57bn or €180/MWh
SOFAZ investment portfolio for 2022 was 73.1% of the fund's total income. Bonuses
approved at $42.3bn. to be paid by oil and gas companies are Energy ministers of the European Union
The base currency of SOFAZ's projected at AZN800.7mn, income from the member states reached a consensus on a
investment portfolio is the US dollar. In management of SOFAZ's foreign exchange cap for natural gas prices on December 19,
accordance with the Programme for the assets was AZN1.59bn. In addition, transit according to the spokesperson for the Czech
Use of State Oil Fund Funds for 2023, the income is projected at AZN23.59mn, per Republic's EU presidency, Dmitrij Černikov.
main goal of the fund's investment policy acre payments AZN4.3mn. Reuters reported, citing an official
next year will be to maximise profitability In the structure of the fund's expenses, document, that the new policy states that
in the face of a low risk of capital losses. AZN11.28bn or 99% will be transferred to a cap on gas prices will be implemented at
According to the programme, 65% of the the state budget of Azerbaijan. In addition, €180 per MWh.
investment portfolio will be formed from the costs associated with the management Previously the EU had discussed setting
the fund's assets in US dollars (for 2022 - of the fund are provided in the amount of the upper limit of the gas price cap at €220.
65%), 20% in euros (in 2022 - 20%), 5% in AZN37.1mn, for the implementation of Several nations, including Europe's biggest
pounds sterling, 10% in other currencies. the State Programme for Improving the economy, Germany, have opposed the idea
According to the terms, 50% of Competitiveness of the Higher Education of any cap, saying it could make it harder
the fund's investment portfolio with a System in Azerbaijan for 2019-2023 in the to secure supplies. However, Belgium,
maximum deviation interval of 5% must amount of AZN38.5mn, for financing the Italy and Poland see it as a way to protect
be placed in debt obligations and money state programme "Education of Youth in consumers and the economy from the shock
market instruments during 2023 (in 2022 prestigious higher educational institutions of high energy prices.
- 50%), a maximum of 25% in portfolio of foreign countries for 2022-2026" in the Under a compromise put forward by
shares, up to 10% in real estate, up to 15% amount of AZN36.7mn. the Czech Republic, which holds the EU's
in gold (in 2022 - 15%). rotating presidency, the cap kicks in if
To ensure the liquidity of the State prices exceed €180 per MWh for five days
Oil Fund, and the timely execution of Kazakh company halts gas on a month-ahead contract at the TTF hub
the envisaged expenses, the fund must in the Netherlands, reported Reuters. At
constantly keep in highly liquid short- supplies meant for China in the same time, the TTF price, which serves
term monetary instruments an amount as the European benchmark, must be €35
equivalent to at least $100mn. According favour of supplying local homes higher than the reference price for liquefied
to the programme, the number of gas, based on numerous existing estimates
the fund's assets managed by foreign Kazakh officials in eastern Kazakhstan of LNG prices, for the cap to work.
companies cannot exceed 60% of SOFAZ's announced that gas exports to China from According to Bloomberg estimates, there
investment portfolio. At the same time, one the local Tarbagatai Oil company were were more than 40 days in the past year
management company can account for no halted on January 1 due to an expiring deal when European companies would not be
more than 5% of the investment portfolio. and complaints by locals that some villages able to purchase gas at the peak price in
The State Oil Fund of Azerbaijan, were without gas supplies while fuel was accordance with the new rules.
established in December 1999, accumulates being sent to China. How the ceiling will affect the European
revenues from the implementation of oil A contract between Tarbagatai Oil market as a whole is not entirely clear –
contracts, in particular from the sale of company, which operates the Sarybulak which is why regulators talk about a long
profitable state oil and gas, transit tariffs for gas mine, and the Kazakh Energy Ministry “watch phase” for the markets both before
the transportation of oil and gas through reportedly expired on December 31 despite and after its introduction. On the one
the country, from the lease of state property, reports also claiming that the company hand, the ceiling eliminates the threat of
etc. As of September 30, 2022, SOFAZ assets never fulfilled the 75mn-cubic-metre order. unlimited price run-up, which has come
were estimated at $45.386 billion. In July, a regional official announced a close to the Union this summer.
suspension in gas supplies from the firm On the other hand, it weakens the
due to the depletion of gas reserves in the position of the European Union in the
Azeri president approves budget Zaisan Basin. competitive global LNG market, threatens
to overflow gas to the non-transparent
Activists in the area had recently
of State Oil Fund for 2023 with complained that locals were undersupplied over-the-counter market, increase spot
during the bitterly cold Central Asian
prices and undermine the exchange market
deficit of $1.4bn winter. and the infrastructure tied to it for many
A Tarbagatai Oil representative
years to come. “Such a shift would likely not
Azerbaijani President Ilham Aliyev reportedly said that it was uncertain reduce the damage to end consumers from
approved the budget of the State Oil whether the gas-export route from price hikes,” Jacob Mandel of Aurora Energy
Fund (SOFAZ) for 2023 on 30 December, Sarybulak to China will be reopened. Research told Bloomberg.
according to a document published on the The Kazakh government is prioritising
Presidential Office's website. The income of energy supplies to locals amid a major

P14 www. NEWSBASE .com Week 01 04•January 04•2022